Use this program to analyze profits based on an item’s sales/price/cost curve. By highlighting the interrelationship between price, cost and gross margin, and indicating how sales must be affected to maintain the same total gross margin, the user is better able to determine the optimum selling price.
Changing almost any of the two fields below affects the information and other rows and columns. Entering unit sales projections displays the total gross margin in dollars and margin.
For example, an item costing $4 and selling for $5 has a gross margin of $1 or 25% (depending on the GM % basis flag in the company control record - set to C-cost for this example). To determine the effect of lowering the price just $.25 to $4.75, simply change the new price to $4.75, or specify the new GM as $.75. The resulting display shows the new GM % to be 18.8%, the change in price to be 5%, yet sales must increase 33.3% to retain the same total dollar profit!
This inquiry does not maintain or retain any data in any files. The old and new costs are set to be the same for each item as it is displayed. The user enters the fields to be changed for analytical purposes.
To access this program, choose Inventory Control>Inquiries >Profit Analysis Inquiry.
Click Field Descriptions for information on each field.